Buy Low, Sell High?

Anyone who has been about people that invest in the stock market have heard the saying, “Buy low, sell high.” That means you should buy a stock when the price is low, say when a company has a poor quarterly report, and then sell the stock when you believe it has peaked. Unfortunately, there are many holes in this method. First being, it is pretty difficult to predict when a stock will truly “peak out.” Second, this is not a sure fire way to guarantee making money. Despite what your uncle tells you, just because you bought a stock at a price that was lower than it was yesterday does not mean you’re going to make money.

Today I was asked by a friend when the right time to buy a stock was. I immediately thought of this say, and in fact used it in my explanation to her. Generally, by looking at the charts you can see when a stock has “bottomed out” meaning it looks to have plateaued  and will not be going any lower. But this is not a guarantee. Just because a stock appears to have leveled out this does not mean it won’t continue to go down. Brad Sherman did an article with CNBC, in it he stated that it was more important to spend your time diversifying you account than it is trying to time the market. I couldn’t agree more. Instead of trying to squeeze every last cent out of a stock before you buy, it may may be more important to put time into researching different stocks and diversifying.

When should you sell? The questions that has many answers. In a perfect would the only time you would sell is when you were ready to cash out. Unfortunately, we can’t always count on our investments being perfect. There are plenty of indicators that you can look to in regards to selling a stock. One of which is rapid price acceleration. While it may be tempting to ride that out as long as you can it is a risky business. Generally a stock will fall in value after a quick price rise. This is due to a stock being overvalued. Another simple method of selling your stocks it setting goals. For example, if you buy a stock at $25 a share you can set a goal of making $5 on each share. Once the stock hits $30 you sell.

I hope this blog was helpful to all of you. As always if you have any questions feel free to ask! Until next time, keep investing!!


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